Sample Auditor’s Report on Financial statements Prepared in Accordance with HKAS
700 “The Independent Auditor’s Report on a Complete
Set of General Purpose Financial Statements”
- effective for auditor’s reports dated on or after 31 December 2006
Example 1 – Company incorporated in Hong Kong
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
留學生dissertation網( incorporated in Hong Kong with limited liability)
We have audited the financial statements of Specimen Company Limited (the “Company”) set out on
pages ___ to ___ , which comprise the balance sheet as at 31 December 2006, and the income
statement, statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This
responsibility includes designing, implementing and maintaining internal control relevant to the
preparation and the true and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies
Ordinance, and for no other purposes. We do not assume responsibility towards or accept liability to
any other person for the contents of this report1. We conducted our audit in accordance with Hong
Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance as to whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and true and fair presentation of the financial statements in order to design audit#p#分頁標題#e#
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial statements.
1 Auditors may consider it appropriate to clarify to whom they are responsible here or elsewhere in the report in accordance with
their risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care to
Third Parties and The Audit Report ”.
2
We believe that audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the state of the Company’s affairs
as at 31 December 200X and of its profit [loss] and cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with
the Hong Kong Companies Ordinance.
[Emphasis of matters
Without qualifying our opinion we draw attention to Note X to the financial statements. The
Company is the defendant in a lawsuit alleging infringement of certain patent rights and claiming
royalties and punitive damages. The Company has filed a counter action, and preliminary hearings
and discovery proceedings on both actions are in progress. The ultimate outcome of the matter
cannot presently be determined, and no provision for any liability that may result has been made in
the financial statements.
Without qualifying our opinion, we draw attention to Note Y to the financial statements which
indicates that the Company incurred a net loss of HK$XXX during the year ended 31 December, 2006
and, as of that date, the Company’s current liabilities exceeded its total assets HK$XX. These
conditions, along with other matters as set forth in Note Y, indicate the existence of a material
uncertainty which may cast significant doubt about the Company’s ability to continue as a going
concern2.]
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
2 In certain circumstances, an auditor’s report may be modified by adding an emphasis of matter paragraph to highlight a matter
affecting the financial statements which is more fully described in a note to the financial statements. The addition of such an
emphasis of matter paragraph does not affect the auditor’s opinion. Such paragraph would preferably be included after the
auditor’s opinion paragraph but before the section on any other reporting responsibilities, if any.
3
Sample Auditor’s Report on Financial statements Prepared in Accordance with#p#分頁標題#e#
HKAS 700 “The Independent Auditor’s Report on a Complete
Set of General Purpose Financial Statements”
- effective for auditor’s reports dated on or after 31 December 2006
Example 2 – Company incorporated in Hong Kong submitting group financial statements
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the consolidated financial statement of Specimen Company Limited (the “Company”)
set out on pages ……to……, which comprise the consolidated and Company balance sheets as at 31
December 2006, and the consolidated income statement the consolidated statement of changes in
equity and the consolidated cash flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors of the Company are responsible for the preparation and the true and fair presentation of
these financial statements in accordance with Hong Kong Financial Reporting Standards issued by the
Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance.
This responsibility includes designing, implementing and maintaining internal control relevant to the
preparation and the true and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report1. We conducted our audit in accordance with Hong
Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurances as to whether the financial statements are free from material
misstatement.
1 Auditors may consider it appropriate to clarify to whom they are responsible here or elsewhere in the report in accordance with
their risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care To
Third Parties and The Audit Report ”.
4
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including#p#分頁標題#e#
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and true and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of
the Company and of the Group as at 31 December 2006 and of the Group’s profit [loss] and cash
flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have
been properly prepared in accordance with the Hong Kong Companies Ordinance.
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
5
Sample Auditor’s Report on Financial statements Prepared in Accordance with
HKAS 700 “The Independent Auditor’s Report on a Complete
Set of General Purpose Financial Statements”
- effective for auditor’s reports dated on or after 31 December 2006
Example 3 – Company incorporated overseas and reporting in Hong Kong
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
(incorporated in [country or place] with limited liability)1
We have audited the financial statements of Specimen Company Limited (the “Company”) set out on
pages ___ to ___ , which comprise the balance sheet as at 31 December 2006, and the income
statement, statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants2 and [the disclosure requirements of Hong Kong Companies
Ordinance3]. This responsibility includes designing, implementing and maintaining internal control
relevant to the preparation and the true and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting#p#分頁標題#e#
policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with the agreed terms of engagement, and for no
other purpose. We do not assume responsibility towards or accept liability to any other person for
the contents of this report4. We conducted our audit in accordance with Hong Kong Standards on
Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards
require that we comply with ethical requirement and plan and perform the audit to obtain reasonable
assurance as to whether the financial statements are free from material misstatement.
1 In Hong Kong, it is a company practice to disclose the place of incorporation of the company.
2 It may be necessary to refer to International Financial Reporting Standards or other national accounting standards and/or other
national legal requirements depending on the jurisdiction in which the company is incorporated.
3 For a company incorporated overseas and listed in Hong Kong, the disclosure requirements of the Hong Kong Companies
Ordinance are applicable.
4 Auditors may consider it appropriate to clarify to whom they are responsible here or elsewhere in the report in accordance with
their risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care To
Third Parties and The Audit Report”.
6
An audit involves performing procedures to obtain evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and true and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the state of the company’s affairs
as at 31 December 2006 and of its profit [loss] and cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards [and have been properly prepared in accordance with#p#分頁標題#e#
the disclosure requirements of Hong Kong Companies Ordinance3].
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
7
Sample Auditor’s Report on Financial statements Prepared in Accordance with
HKAS 701 “Modification of The Independent Auditor’s Report
- effective for auditor’s reports dated on or after 31 December 2006
Example 4 – Qualified opinion – disagreement with management
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the financial statements of Specimen Company Limited (the “Company”) set out
pages ___ to ___, which comprise the balance sheet as at 31 December 2006, and the income
statement, statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This
responsibility includes designing, implementing, and maintaining internal control relevant to the
preparation and the true and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report1. We conducted our audit in accordance with Hong
Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance as to whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and true and fair presentation of the financial statements in order to design audit#p#分頁標題#e#
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriate
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial statements.
1 Auditors may consider it appropriate to clarify to whom they are responsibility here or elsewhere in the report in accordance
with their risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care
To Third Parties and The Audit Report”.
8
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Basis for qualified opinion
Included in debtors shown on the balance sheet is an amount of HK$X due from a debtor which has
ceased trading. The Company has no security for this debt. On the basis that no security has been
obtained and no cash has been received on the debt, in our opinion, the Company should make a full
provision for impairment of HK$X, reducing profit before taxation for the year and net assets at 31
December 2006 by that amount.
Qualified Opinion arising from disagreement about accounting treatment
In our opinion, except for the effect on the financial statements of the matter described in the basis for
qualified opinion paragraph, the financial statements give a true and fair view of the state of the
Company’s affairs as at 31 December 2006 and of its profit[loss] and cash flows for the year then
ended in accordance with Hong Kong Financial Reporting Statements and have been properly
prepared in accordance with Hong Kong Companies Ordinance.
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
9
Sample Auditor’s Report on Financial statements Prepared in Accordance with
HKAS 701 “Modification of The Independent Auditor’s Report
- effective for auditor’s reports dated on or after 31 December 2006
Example 5 – Qualified opinion – limitation of the auditor’s work
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
Report on the financial statements
We have audited the financial statements of Specimen Company Limited (the “Company”) set out on
pages ___ to ___ , which comprise the balance sheet as at 31 December 2006, and the income
statement, statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial#p#分頁標題#e#
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This
responsibility includes designing, implementing and maintaining internal control relevant to the
preparation and the true and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report1. Except as described in the basis for qualified
opinion paragraph, we conducted our audit in accordance with Hong Kong Standards on Auditing
issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and true and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
1 Auditors may consider it appropriate to clarify to whom they are responsible here or elsewhere in the report in accordance with their risk
management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care To Third Parties and
The Audit Report”.
10
the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Basis for qualified opinion
HK$X of the Company’s recorded turnover comprises cash sales, over which there was no system of
internal control on which we could rely for the purpose of our audit. There were no other#p#分頁標題#e#
satisfactory audit procedures that we could adopt to satisfy ourselves that the recorded turnover was
free from material misstatements.
Qualified opinion arising from limitation of audit scope
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be
necessary had we been able to satisfy ourselves as to cash sales, the financial statements give a true
and fair view of the state of the Company’s affairs as at 31 December 2006 and of its profit[loss] and
cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and
have been properly prepared in accordance with the Hong Kong Companies Ordinance.
Report on matters under sections 141(4) and 141(6) of the Hong Kong Companies Ordinance2
In respect alone of the limitation of our work relating to cash sales:

We have not obtained all the information and explanations that we considered necessary for
the purpose of our audit; and

We were unable to determine whether proper books of account had been kept.
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
2 For the requirements under the Hong Kong Companies Ordinance, reference may be made to PN600.1 ‘Reports by auditors
under the Hong Kong Companies Ordinance”.
11
Sample Auditor’s Report on Financial statements Prepared in Accordance with
HKAS 701 “Modification of The Independent Auditor’s Report
- effective for auditor’s reports dated on or after 31 December 2006
Example 6 – Disclaimer of opinion – limitation on the auditor’s work
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
Report on the financial statements
We were engaged to audit the financial statements of Specimen Company Limited (the “Company”)
set out on pages ___ to ___ , which comprise the balance sheet as at 31 December 2006, and the
income statement, statement of changes in equity and cash flow statement for the year then ended, and
a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This
responsibility includes designing, implementing and maintaining internal control relevant to the
preparation and the true and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.#p#分頁標題#e#
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This
report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report1. Except for the limitation in the scope of our work as
explained below, we conducted our audit in accordance with Hong Kong Standards on Auditing issued
by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurances as to
whether the financial statements are free from material misstatement. However, because of the
matter described in the basis for disclaimer of opinion paragraph, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion.
Basis for disclaimer of opinion
We were initially appointed auditors on [date] which was subsequent to the end of the Company’s
financial year. In consequence we were unable to carry out auditing procedures necessary to obtain
adequate assurance regarding the quantities and condition of inventories and work in progress,
1 Auditors may consider it appropriate to clarify to whom they are responsible here or elsewhere in the report in accordance with
their risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care To
Third Parties and The Audit Report”.
12
appearing in the balance sheet at HK$X. There were no other satisfactory audit procedures that we
could adopt to obtain sufficient evidence regarding the existence of inventories and work in progress.
Accordingly, we have not been able to obtain sufficient appropriate audit evidence to provide a basis
for an audit opinion. Any adjustment to the figure may have a consequential significant effect on the
profit [loss] for the year and net assets at 31 December 2006.
Disclaimer of opinion: disclaimer on view given by financial statements2
Because of the significance of the matters described in the basis for disclaimer of opinion paragraph,
we do not express an opinion on the financial statements as to whether they give a true and fair view
of the state of the Company’s affairs as at 31 December 2006 and of its profit [loss] and cash flows for
the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other
respects, in our opinion the financial statements have been properly prepared in accordance with Hong
Kong Companies Ordinance.
Report on matters under sections 141(4) and 141(6) of the Hong Kong Companies Ordinance3
In respect alone of the limitation on our work relating to inventories and work in progress:#p#分頁標題#e#

We have not obtained all the information and explanations that we considered necessary for
the purpose of our audit; and

We were unable to determine whether proper books of account had been kept.
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
2 In this example, it is assumed that the counting of physical inventories is so material and pervasive that auditor has not been able to
obtain sufficient appropriate audit evidence and accordingly is unable to express an opinion on the financial statements. If the limitation
of scope is not considered so material and pervasive, the auditor may express an “except for” opinion as illustrated in paragraph 19 of
this HKSA.
3 For the requirements under the Hong Kong Companies Ordinance, reference may be made to PN 600.1 “Reports by audits
under the Hong Kong Companies Ordinance”.
13
Sample Auditor’s Report on Financial statements Prepared in Accordance with
HKAS 701 “Modification of The Independent Auditor’s Report
- effective for auditor’s reports dated on or after 31 December 2006
Example 7 – Adverse opinion – disagreement with management
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SPECIMEN COMPANY LIMITED
( incorporated in Hong Kong with limited liability)
We have audited the financial statements of Specimen Company Limited (the “Company”) set out pages ___
to ___, which comprise the balance sheet as at 31 December 2006, and the income statement, statement of
changes in equity and cash flow statement for the year then ended, and a summary of significant accounting
policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the Hong Kong Companies Ordinance. This responsibility includes
designing, implementing, and maintaining internal control relevant to the preparation and the true and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable
in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This report is
made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance, and
for no other purpose. We do not assume responsibility towards or accept liability to any other person for
the contents of this report1. We conducted our audit in accordance with Hong Kong Standards on Auditing#p#分頁標題#e#
issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and
fair presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriate of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial statements.
1 Auditors may consider it appropriate to clarify to whom they are responsibility here or elsewhere in the report in accordance with their
risk management policies and with reference to Professional Risk Management Bulletin No. 2 “Auditors’ Duty of Care To Third Parties
and The Audit Report”.
14
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Basis for adverse opinion
As more fully explained in note ___ to the financial statements, losses expected to arise on certain long-term
contracts currently in progress have not been recognised as expenses, as the directors consider that such
http://www.400190.com/Thesis_Writing/losses should be off-set against amounts recoverable on other long-term contracts. In our opinion, the
expected losses on individual contracts should be recognised as expenses immediately as required by Hong
Kong Accounting Standard 11 “Construction Contracts”. If losses had been so recognised the effect would
have been to [reduce the profit/increase the loss] before taxation for the year and reduce the gross amounts
due from customers at 31 December 2006 by HK$X.
Adverse Opinion
In our opinion, because of the significance of effects of the matters described in the basis for adverse opinion
paragraph, the financial statements do not give a true and fair view of the state of the Company’s affairs as at
31 December 200X and of its profit[loss] and cash flows for the year then ended in accordance with Hong
Kong Financial Reporting Standards. In all other respects, in our opinion the financial statements have#p#分頁標題#e#
留學生dissertationbeen properly prepared in accordance with Hong Kong Companies Ordinance.
A B C & Co.
Certified Public Accountants (Practising)
Hong Kong, [Date]
15